About this Author
DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

Chemistry and Drug Data: Drugbank
Chempedia Lab
Synthetic Pages
Organic Chemistry Portal
Not Voodoo

Chemistry and Pharma Blogs:
Org Prep Daily
The Haystack
A New Merck, Reviewed
Liberal Arts Chemistry
Electron Pusher
All Things Metathesis
C&E News Blogs
Chemiotics II
Chemical Space
Noel O'Blog
In Vivo Blog
Terra Sigilatta
BBSRC/Douglas Kell
Realizations in Biostatistics
ChemSpider Blog
Organic Chem - Education & Industry
Pharma Strategy Blog
No Name No Slogan
Practical Fragments
The Curious Wavefunction
Natural Product Man
Fragment Literature
Chemistry World Blog
Synthetic Nature
Chemistry Blog
Synthesizing Ideas
Eye on FDA
Chemical Forums
Symyx Blog
Sceptical Chymist
Lamentations on Chemistry
Computational Organic Chemistry
Mining Drugs
Henry Rzepa

Science Blogs and News:
Bad Science
The Loom
Uncertain Principles
Fierce Biotech
Blogs for Industry
Omics! Omics!
Young Female Scientist
Notional Slurry
Nobel Intent
SciTech Daily
Science Blog
Gene Expression (I)
Gene Expression (II)
Adventures in Ethics and Science
Transterrestrial Musings
Slashdot Science
Cosmic Variance
Biology News Net

Medical Blogs
DB's Medical Rants
Science-Based Medicine
Respectful Insolence
Diabetes Mine

Economics and Business
Marginal Revolution
The Volokh Conspiracy
Knowledge Problem

Politics / Current Events
Virginia Postrel
Belmont Club
Mickey Kaus

Belles Lettres
Uncouth Reflections
Arts and Letters Daily
In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

In the Pipeline

« Fighting Boredom, Profitably | Main | RNAi: Bubble or Not? »

August 20, 2008

Replacing What's Being Lost

Email This Entry

Posted by Derek

Well, today’s subject isn’t a cheerful data set, but it certainly deserves some thought. Over at Pharmalot, Ed Silverman has some data from consulting firm AVOS Life Sciences, who have sat down to estimate how well various drug companies will do with revenue from new drugs over the next few years.

As of 2007, they have the industry average at about 77 cents coming from new products (defined as those launched within the previous five years) for every dollar lost from patent-expiring older ones. That doesn’t sound very good, but the average is a bit misleading, since it runs from the highs of Eli Lilly ($6.64/1), Amgen ($4.50/1) and Roche ($4.03/1) down to Sanofi-Aventis (11 cents new per dollar loss on the old). But it’s true that most everyone else is well under a dollar. It would be a lot of work, but it would be interesting to know (calculating by the same methods) how that ratio has changed over the last twenty years – that would give us some perspective on where we stand now.

But AVOS has gone out to estimate the picture in 2012, and it makes today’s numbers seem like a free buffet. Of the fourteen drug makers on their list, only Schering-Plough shows a robust increase in terms of how much it’s expected to make from new products versus its declining ones. GSK shows a modest improvement – and everyone else goes down.

That’s as in down, dooby doo, down down. The hardest-hit in terms of the actual numbers are Pfizer, AstraZeneca, Roche, and Sanofi-Aventis, all of whom are projected to be making pennies (or, gulp, nothing at all) from new products compared to what’s heading down the chute for them by then. In percentage terms, Roche and Eli Lilly are worst off – they look good now, as mentioned above, but the eventual losses of things like Zyprexa kick the ratios over good and hard. (Sanofi-Aventis goes down to zero, but only from that $0.11 figure, so it’s at least not going to be such an adjustment for them!)

As I say, I don’t have access to the underlying data, but the broad picture seems about right. There are a lot of big patent expirations coming up in the next few years, and not enough promising products coming on to replace them. According to AVOS, Roche and Sanofi-Aventis aren’t projected to have any new product launches at all between now and 2012, which can’t be good.

It’s worth remembering that figures like these are likely to show big swings even under normal conditions. Imagine a company with a big product that it launches, which gradually turns into a blockbuster. Near the end of its patent life, it launches another winner of the same type, which grows into another big seller. Everything’s fine! But the ratio of new revenue/expiring revenue is going to swing around a lot as you follow those sales numbers, sort of like derivatives in calculus, veering from too-high to too-low, although the company itself is sailing along pretty well. Let’s hope that this is some of the background for these numbers as well. The problem is, I don’t think that can explain all of them. . .

Comments (13) + TrackBacks (0) | Category: Drug Development | Drug Industry History


1. Daniel haszard on August 20, 2008 8:27 AM writes...

Zyprexa has generated a lot of bad press for Eli Lilly and they still have unresolved Zyprexa settlement claims.
Eli Lilly is 'reaping the whirlwind' for aggressive marketing of Zyprexa that has caused suffering and deaths.
Zyprexa is being avoided by doctors they aren't prescribing it for new patients at all anymore.
Daniel Haszard 4 year Zyprexa patient who got diabetes from it.

Permalink to Comment

2. Petros on August 20, 2008 8:38 AM writes...

Popular topic at the moment. Evaluate Pharma publsihed something last week on the same thing and Scrip's latest Executiev Briefing is devoted to it,calling it the Patent Cliff.

I'm just reviewing it at the moment and it looks bad for several of the big boys. Pfizer has lost Norvasc and Zyrtec but still has the Lipitor issue to address. AZ could take a hammering depending which patent(s) for Nexium are upheld

Roche is better positioned becuase of its heavy reliance on biologicals which are much less prone to lose revenue even if off-patent. It looks like biosimilars won't have an approval path sorted out in the US before the end of tthis session.

Permalink to Comment

3. dave on August 20, 2008 8:53 AM writes...

Correct me if I am wrong, but Sanofi-Aventis the last few months seems to be positioning themselves to remain the worlds largest vaccine manufacturer (Sanofi-Pasteur). From what I have read they seem to be doing well. I know that vaccines are almost always going to be considered commodity drugs and the profit margins are small, but is all that money Sanofi is throwing into R&D an effort just to get into the black. I don't know how much government/organizational funding goes into this, or how much they have received. It would be interesting to hear more about this. Thanks.

Permalink to Comment

4. The Pharmacoepidemiologist on August 20, 2008 1:59 PM writes...

It's worth remembering Pfizer loses Lipitor in that time period. Also, Roche has access to all the Genentech drugs, so I don't think the Roche pipeline is as barren as suggested. On the other hand, the problem showing up in this analysis is the wonderful leadership in drug discovery and development from those all-knowing MBAs who run the big pharma companies these days. They had no knowledge of biology or medicine, and their insight into what makes a physician write a scrip for their product goes as far as the check they're willing to write to the CME production company.

Permalink to Comment

5. Harvey on August 20, 2008 3:53 PM writes...

The big boys are cash rich and pipeline poor. Companies with good pipelines and lagging share prices like SP better watch their step. It wouldn't be the first such deal done by Hassan and Co.

Permalink to Comment

6. sorrowful on August 20, 2008 6:05 PM writes...

Oh what fun to talk about which pharma is up and which is down. How about talking about things like how many people have been killed by Zyprexa and when there is going to be a criminal trial. Giving money back to the government for fraud, off label marketing, and hiding known lethal side effects is not justice. Have the drug go off patent doesn't do it either. Syd and Co. did the crime and they need to do the time.

Permalink to Comment

7. worry wort on August 20, 2008 10:11 PM writes...

So why is the angel/VC scene so pathetic given the obvious pipeline problems for the big boys? One would think money would flow to start-ups in this environment, but this obviously isn't happening.

Permalink to Comment

8. worry wort on August 20, 2008 10:12 PM writes...

So why is the angel/VC scene so pathetic given the obvious pipeline problems for the big boys? One would think money would flow to start-ups in this environment, but this obviously isn't happening.

Permalink to Comment

9. DrSnowboard on August 21, 2008 2:21 AM writes...

Startups are too late for the short term pipeline stuffing that's needed for most limping big Pharmas, IMHO. Beside, in europe at least, VCs in late perhaps got left with some platforms that actually were only useful for diving off, or massive government granted expansion (Germany?) also leading to poor returns. Perhaps the siRNA, miRNA bonanza will be different from all the other 'omics' that promised but failed to deliver. After all, the frenzy for 'ogics' is for quite well established companies with, god forbid, actual products treating patients.

Permalink to Comment

10. MTK on August 21, 2008 7:02 AM writes...


Not true according to this report.

VC spending was at an all-time high in 2007 led by the Clean Technologies sector and the Life Sciences sector. Now the Life Sciences emcompasses more than just therapeutics, but the point is VC spending is up. The VC guys aren't stupid. They see how much Big Pharma is paying for outfits like siRNA. Currency exchange rates probably help also.

Permalink to Comment

11. harvey on August 21, 2008 7:37 AM writes...

It is the strong phase 3 pipeline of SP that will make them attractive. With a couple of potential blockbusters like golimumab and the TRA compound in the mix.

Permalink to Comment

12. Mike Goodman on August 22, 2008 10:36 AM writes...

Harvey, I'd add that, unlike many of its large-cap peers, SP has already passed through its patent crisis. It's starting from a lower base than the others. Therefore, if golimumab, SCH-503034, and SCH-5034308 successfully launch in the 2009-2010 timeframe, that revenue, because it greatly outweighs revenue lost from declining products, will go straight to bolstering SP's replacement ratio.

Permalink to Comment

13. Jonadab the Unsightly One on August 26, 2008 6:20 AM writes...

It is worth remembering that the expiration of those patents is ultimately a good thing. It's a hard thing for the companies making those drugs, especially in the short term, but it is nonetheless also good.

It's easy to see how it's good for the consumer, but more than that it's also good for the companies in question, because it prevents them from resting forever on the merit of past accomplishments, which would be unhealthy. If the patents weren't going to expire, how much research do you think they'd really be doing? In the long term, those expirations are not just beneficial, but also necessary.

That doesn't make them easy to bear, of course, and if they all expire at once that's going to make for some rough years for the company, sure.

It would be interesting to see long-term average figures on how many patent-years of existing profitable drugs any given company has typically had left in its portfolio at any given time, and how the present compares to the past in that regard. I suspect there's probably been a fair amount of up and down all along. Actually, the standard deviation might be even more interesting than the mean.

Permalink to Comment


Remember Me?


Email this entry to:

Your email address:

Message (optional):

The Last Post
The GSK Layoffs Continue, By Proxy
The Move is Nigh
Another Alzheimer's IPO
Cutbacks at C&E News
Sanofi Pays to Get Back Into Oncology
An Irresponsible Statement About Curing Cancer
Oliver Sacks on Turning Back to Chemistry